High Impact Tax Breaks for 2013

Here are some tax strategies that could deliver big benefits for 2013: Home-sale benefit. As often as every two years, taxpayers can sell a principal residence (not a second home) and the profit will be tax-free—up to $500,000 for married couples or $250,000 for singles. A surviving spouse gets the full $500,000 break for up to two years after a spouse’s death.  “Step-up” at death. Under current law, taxpayers don’t owe capital-gains tax on assets held at death. Instead, the assets are stepped up to their current value and become part of the taxpayer’s estate, with no income tax due on the profits.  Estate-tax exemption portability. This provision, made permanent in January, allows a spouse’s estate to transfer to the survivor the unused portion of the lifetime gift-and-estate tax exemption.  So if a wife dies leaving an estate of $500,000, her husband could receive her unused $4.75 million exemption and add it to his own $5.25 million one, for a total $10 million future exemption. But to take advantage of this provision, the executor must file an estate-tax return.

Wall Street Journal    July 7, 2013